The Capital Markets Authority is reviewing eligibility requirements for firms that wish to list on the bourse.
This is meant to remove unnecessary barriers and attract new listings, the regulator’s chief executive told Reuters on Tuesday.
Although there are more than 60 companies on the Nairobi Securities Exchange, which has a total market capitalisation of $27.90 billion (Sh2.8 trillion), the bourse has struggled to attract new listings and daily trading is dominated by a handful of large firms.
The authority's chief, Paul Muthaura, said they were reviewing rules, including requirements for companies to be profitable in three of the past five years before listing and another that fixes standards on debt-to-equity levels.
“Our discussion is very much around identifying large domestic enterprises or regional enterprises that will be looking to tap the market,” he said.
At least 75 per cent of the total capitalisation at the NSE is accounted for by just six of the listed firms, with telecoms giant Safaricom alone accounting for Sh1.22 trillion, Thomson Reuters data show.
Having a single company that accounts for a large percentage of market capitalisation presents a risk that if anything happens to that company, it will affect the whole market, Mr Muthaura said.
More listings of large companies will diffuse that risk, he said.
Muthaura said part of the explanation to companies is that it may be cheaper for them to raise capital by listing their shares than via traditional alternatives, such as financing from banks or private equity.
Public disclosures that will accompany a listing are another factor making some firms reluctant, he added.